Ninth Circuit Rules That Users, Not Consumers, Must Prove an Authorized Purpose for Obtaining a Consumer Report

Ninth Circuit Rules That Users, Not Consumers, Must Prove an Authorized Purpose for Obtaining a Consumer Report

November 21, 2019 Off By administrator

Synopsis: Last month, the Ninth Circuit issued an opinion, affirming broad Article III standing and holding that, for permissible-purpose claims, a consumer-plaintiff need allege only that his/her credit report was obtained for a purpose not authorized by the statute to survive a motion to dismiss, regardless of whether the report is published or otherwise used by the third party.

Case Background

In June 2016, Plaintiff Freshta Nayab discovered that a banking institution (“the Bank”) had made several inquiries on her Experian credit report. She sued the Bank alleging that the unauthorized inquiries violated the Fair Credit Reporting Act (“FCRA”) because she never conducted any business with nor incurred any financial obligations to the Bank.

The Bank moved to dismiss the complaint for failure to state a claim. Instead of opposing the motion, Nayab filed an amended complaint where she cited various permissible purposes for obtaining a credit report under the FCRA, and alleged that the Bank did not have any of those permissible purposes to make inquiries on her credit report.

The district court dismissed the case, finding that Nayab did not have standing to pursue her FCRA claim because, even if the Bank’s credit inquiries were impermissible under the FCRA, “absent disclosure to a third party or an identifiable harm from the statutory violation, there is no privacy violation.” Nayab, slip op. at 5. The district court also dismissed Nayab’s complaint for failure to state a claim, finding that “bare allegations that the defendant did not have a permissible purpose for obtaining a credit report, without more, are insufficient.” Id. at 5.

Nayab appealed.

The Ninth Circuit’s Opinion

In an opinion by Judge Rice, the Ninth Circuit considered two issues: (1) whether a consumer suffers a concrete Article III injury in fact when a third-party obtains her credit report for a purpose not authorized by the FCRA, and (2) whether the consumer-plaintiff must plead the third-party’s actual unauthorized purpose in obtaining the report to survive a motion to dismiss. Id. at 4.

The Ninth Circuit rejected the district court’s holding that Nayab lacked standing because she did not suffer concrete harm where the unauthorized inquiries were not disclosed or used by the Bank. Relying on Robins v. Spokeo, Inc. (Spokeo III), the Ninth Circuit reiterated that some statutory violations alone confer Article III standing. 867 F.3d 1108, 1113 (9th Cir. 2017), cert. denied, 138 S. Ct. 931 (2018). In Spokeo III, the Ninth Circuit held that a statutory violation can by itself manifest concrete injury where “the procedural right [was created] to protect a plaintiff’s concrete interests and where the procedural violation presents ‘a risk of real harm’ to that concrete interest.” Spokeo III, 867 F.3d at 1113.

Based on this reasoning, the Ninth Circuit held that Nayab had standing to pursue her FCRA claims because “obtaining a credit report for…

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